A common misconception among homeowners everywhere is that a foreclosure only hurts the affected family. Unfortunately, this is not the case. Foreclosure not only affects its victims directly but also carries with it a longstanding impact on entire neighborhoods for a variety of reasons. In order to protect what is usually your largest investment, ask yourself this question: “Are you doing enough to prevent foreclosures in your neighborhood? ” Because, like it or not, it is your problem too; and from this, I speak from experience as a real estate agent and property owner.
Decreased property value
You don’t have to be a brain surgeon to realize that if a foreclosure in your neighborhood sells at a drastically reduced price, it drops your property value. The appraised value of properties is the baseline banks use when underwriting new loans or approving a refinance. The lower property values decline in your neighborhood, the more equity you lose.
After the gavel falls on a foreclosure, the house sits vacant, often for extended periods. Vacant properties have no one looking after the exterior or indoor maintenance. Yards become overgrown and items inside the property are prone to break when not being watched; flooding, fires, or multitudes of other costly repairs ensue -all of which is distressing news for your property values, as banks will reduce the price to compensate for the damage.
As a real estate agent specializing in foreclosure and short sale properties, I can personally attest to the increased crime rate associated with vacant foreclosures. Thieves and petty criminals take things like ceiling fans, copper wiring, air conditioning units, appliances and anything else that was not nailed down'”sometimes even things that were nailed down. The increased crime rate in a neighborhood makes the neighborhood less appealing to potential buyers. In response, banks will continuously reduce the price of the property further and further, until it sells. As the price drops, so does the value in your home.
Investors and rentals
Foreclosed properties are a steal; ripe for the picking for cash-rich and eager investors. As opposed to real estate investing philosophies of years past; flipping a property and selling it for profit, today’s investor is more likely to rehab the property and rent it out. Great news for the investor, but homeowners must remember that many renters do not take the same pride of ownership that a homeowner might in many cases. Less care, more repairs, and another way the investment in your home is now tanking.
Chalk it up to a single reason, or many, all of this adds up to ways your home value will continue to decline until a market recovery. Yet, your hands aren’t tied. Let me tell you what I do in my own community.
What you can do
Create a homeowner task force dedicated to passing out information in the neighborhood covering different resources available to at-risk families. It can be as simple as a single page flyer, or as complex as a brochure. For mine, I print a tri-fold brochure, and pass it around by hanging it on neighborhood doorknobs.
Many homeowners are too embarrassed or afraid to discuss their situation with friends or family. It can be almost impossible to know when a neighbor is in danger of foreclosure until it is too late. Informational flyers or brochures are an effective way to get the word out without causing any undue embarrassment.
Some of the best resources available to homeowners in foreclosure prevention are free counseling services offered by the United States Department of Housing and Urban Development (HUD) and free counseling services offered by the Neighborhood Assistance Corporation of America (NACA). These dual resources act as a mediator between a lender and a homeowner, finding solutions to help him stay in his home or find options in lieu of a foreclosure.
I conduct homeowner meetings and workshops in conjunction with the two entities I mentioned, in a volunteer’s home or at a local housing office, once per month. At these meetings, we collect a foreclosure prevention fund, specific to each neighborhood. If I could offer neighbors one piece of advice it would be this: Consider beginning a neighborhood foreclosure prevention fund in your neighborhood; 200 people donating $20.00 is usually enough to help struggling homeowners catch up on mortgage arrearage and secure a practical solution when using these counseling services (remember, donations are tax-deductible). Doing your part in for foreclosure prevention keeps property values high and families in homes; creating a win/win situation for all involved. It starts and ends with the amount of energy the neighborhood puts in for preservation, and many times, it starts with you.
More from this Contributor:
Short Sales Vs. Foreclosures
Everything You Never Wanted to Know About Deficiency Judgments